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Preamble:
Whereas it is expedient to define and amend the law relating to promissory notes, bills of exchange and
cheques; It is hereby enacted as follows :--
3. Interpretation of clauses—
In this Act, unless there is anything repugnant in the subject or context,--(
(c) "Bearer" means a person who by negotiation comes into possession of a negotiable instrument,
which is payable to bearer;
(d) "Delivery" means transfer of possession, actual or constructive, from one person to another;
(e) "Issue" means the first delivery of a promissory note, bill of exchange or cheque complete in form
to a person who takes it as a holder;
Chapter II
Of Notes, Bills and Cheques
4. "Promissory note"—
A "promissory note" is an instrument in writing (not being a bank-note or a currency- note) containing an
unconditional undertaking, signed by the maker, to pay 1[on demand or at a fixed or determinable future
time] a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
5. "Bill of exchange"—
A "bill of exchange" is an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay2 [on demand or at a fixed or determinable future time] a certain sum of
money only to, or to the order of, a certain person or to the bearer of the instrument.
6. "Cheque"—
A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise
than on demand.
7. "Drawer." "Drawee."—
The maker to a bill of exchange or cheque is called the "drawer", the person thereby directed to pay is
called the "Drawee."
"Payee.".- The person named in the instrument, to whom or to whose order the money is by the instrument
directed to be paid, is called the "payee."
8. "Holder"—
The "holder" of a promissory note, bill of exchange or cheque means the payee or indorsee who is in
possession of it or the bearer thereof but does not include a beneficial owner claiming through a benamidar.
Explanation Where the note, bill or cheque is lost and not found again, or is destroyed, the person in
possession of it or the bearer thereof at the time of such loss or destruction shall be deemed to continue to
be its holder]
Explanation (ii)—
A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or
on which the only or last endorsement is an endorsement in blank.
Explanation (iii)—
Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to
be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him
or his order .at his option.]
(2) A negotiable instrument may be made payable to two or more payees jointly or it may be made payable
in the alternative to one of two, or one or some of several payees.]
14. Negotiations.—
When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that
person the holder thereof, the instrument is said to be negotiated.
15. Endorsement—
When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the
purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the
same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the
same, and is called the "endorser."
(c) Where the note or bill accepted or indorsed after it is overdue, as regards the person accepting or
indorsing it.]
(1) Where any cheque drawn by a person on an account maintained by him with a banker for payment of
any amount of money to another person from out of that account or the discharge, in whole or in part, of
any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing
to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank, such person shall be deemed to have
committed an offence and shall, without prejudice to any other provision of this Act, be punished with
imprisonment for a term which may extend to one year, or with fine which may extend to thrice the amount
of the cheque, or with both :
Provided that nothing contained in this section shall apply unless--
a) The cheque has been presented to the bank within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the
payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within 30
days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as
the case may be, to the holder in due course of the cheque, within 30 days of the receipt of the said notice.
(1A) the notice required to be served under clause B of sub-section (1) shall be served in the following
manner:
Notwithstanding anything contained in the Code of Criminal Procedure, 1898 no appeal against any order
of sentence under sub-section (1) of section 138 shall lie, unless an amount of not less than fifty percent of
the amount of the dishonoured cheque is deposited before filing the appeal in the Court which awarded the
sentence.
(2) Where any fine is realized under subsection (1), any amount up to the face value of the cheque as far as
is covered by the fine realized shall be paid to the holder. (Added by the Repealing Act, 2000)
(3) Notwithstanding anything contained in subsections (1) and (2). the holder of the cheque shall retain his
right to establish his claim through civil court if whole or any part of the value of the cheque remains
unrealized. (Added by the Repealing Act, 2000)
(2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been
committed by a company and it is proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other
officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty
of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation--For the purposes of this section
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm, means a partner in the firm.